EVENTS

Unrest in Greece

Recall that the events of the Arab spring were triggered by a 26-year old man in Tunisia setting himself on fire in an act of protest and despair at the conditions in that country.

Now an elderly pensioner in Greece has shot and killed himself near the parliament, reportedly leaving a suicide note accusing the government of reducing his pension to nothing. This has sparked violent demonstrations and clashes with the police.

I have written before about how the oligarchy have been imposing harsh measures on the Greek public in order to extract money to repay the loans that were freely given out to them by multinational banks. When people start killing themselves as public acts of protest, that is a sign of deep anger and despair.

Will this Greek suicide trigger mass unrest in other European countries like Portugal, Spain, Ireland, and Italy that are also imposing harsh measures on their people?

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If you listen to the average person, at least around here, they’ll tell you Greece is in trouble because the people are lazy and nobody wants to work, people got too many holidays, nobody wanted to either pay taxes or collect them, and they still wanted gold-plated benefits from the state. If you try to mention that the government is corrupt and conspired with Lehman Brothers to sell Greece’s debt, they’ll just look at you like you’re a child and tell you that people get the government they deserve (so therefore if the Greeks weren’t so lazy and corrupt, they wouldn’t have a corrupt government). As if rigged elections and people who say one thing while they’re running for office and do another thing never existed…

No.
What the Greeks experience is much, much worse than the suffering of the people in Spain, Portugal, Italy and Ireland. Some are in danger of starvation, literally.
Still the harsh measures are not only unfair, they are dumb.

Keeping up the gold standard has immensely inflicted Dutch economy during the crisis of the 30’s. Ironically Dutch economy only recovered during the first years of nazi occupation (for obvious reasons things went downhill again from 1943 on).
In Greece exactly the same happens, except that the gold standard there is replaced by the Euro standard.
The solution was pretty simple ánd has proven its value in the Balkan countries ánd Suriname, where I live: multiple currencies. Suriname uses three currencies, the USD, the Euro and the local SRD. As a result Surinamese economy has been stable last ten years; we even haven’t noticed the two global crises.
Greek government should have reintroduced the Drachme again, alongside the Euro. That obviously only works for small economies, but Greece ís small.
It’s simply ridiculous that such a small economy can trigger such a big crisis in the EU.

Right now in Greece there is a dearth of monetary means to facilitate production, exchange and consumption. However a new one can be created ex nihilo. This is known as “local money”. Countries (or the EU in this case) usually disapprove strongly of this because money is one the pillars of state power (although one could say that it is none of their business to interfere with the way a local community organizes its internal exchanges). The emergence of local money has happened in many places. I suspect it will happen in Greece.

The Greek government will pay civil servants and state pensioners in part with something that may be called a “temporary system of vouchers”, and for convenience it may write on them whatever name they like, for instance “drachma” or “eurodrachma” (introduced with an exchange rate 1€Dr = 1€). These will be usable to buy goods and services in Greece. It will be illegal to refuse them. And if the government doesn’t do this, it’s even conceivable that some private outfit do it.

In a domestic monetary crisis like Greece is experiencing, the population of the country is usually made bluntly aware of the problem when it becomes difficult to get banknotes from one’s bank, even when one has money at the bank. This happened during the 2002 “corralito” episode in Argentina. Banks’ ATMs limit the quantity of banknotes one can withdraw, because banks themselves have difficulties getting banknotes from depositors or from the central bank. Citizens of the country travelling abroad find their credit cards and their checks in euros are no longer accepted either. But in their country citizens can still draw checks on their bank account if it is in credit, i.e., if they have money at the bank.

The existence of this local money is possible because the bank deposits and the checks citizens can write have become a local money no longer “convertible” into real euros. In general the money is created by commercial banks, that is the loans opened in assets and the credits opened in liabilities of banks balance sheets, as long as they comply with the reserves limits imposed by the central bank, are a commercial-banks-created-money which, in normal circumstances, is convertible into real central-bank-money (called high power money) and can be exchanged for banknotes on demand. But when this convertibility into banknotes no longer holds, the commercial-banks-created-money doesn’t vanish. It becomes like any other non-convertible paper money.

So when banks run out of euro banknotes, they still have accounts of loans and of reserves at the central bank and accounts of deposits from citizens. These accounts can henceforth function as a system of commerce, like running up a tab at a bar. There is no need that they be guaranteed by real euros on the asset side of banks. People can write checks and banks belonging to the same clearinghouse can make the appropriate entries in their books. Individual “a” draws a check on bank A and gives it to individual “b” then “b” will take this check to bank B, which in turn will send it to C, the common clearinghouse of A and B. Finally the clearinghouse C will ensure that, on the liability sides of both banks, the account of “b” at B is credited the check amount, while the account of “a” at A is debited the same figure. And the opposite entries are made on the asset sides of both banks, in some other accounts, “reserves at the central bank”, “private debtors”, or any other appropriate account, but not banknotes. This is a local money, formally denominated in euros, but these are no longer real euros, because they are not accepted abroad. They function only within the country.